PROPOSED SALE OF SPEIRS FINANCE
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Speirs Group Limited (SGL) | 11:20 am, Wednesday 23 July 2008 | SGL | 0.500 |
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23 July 2008
SPEIRS GROUP LIMITED
PROPOSED SALE OF SPEIRS FINANCE
Speirs Group Limited ( Speirs Group) has today announced that it has entered
into a conditional agreement to sell its finance business to Allied Farmers
Limited ( Allied Farmers).
Allied Farmers is a diversified rural services and financing company in New
Zealand.
Summary
The proposed sale of the finance business of Speirs Group ( Speirs Finance)
is for consideration of $5.6 million (the Transaction).
Consideration will comprise cash at completion of $3.1 million and new shares
in Allied Farmers to the value of $2.5 million (being 1,851,852 ordinary
shares in Allied Farmers). Speirs Group will hold approximately 8.85% of the
shares of Allied Farmers.
Immediately following completion, Speirs Group will apply $2.0 million of its
cash consideration to subscribe for $2.0 million of perpetual bonds (the
Bonds) in Allied Nationwide Finance Limited ( Allied Nationwide). The Bonds
will be perpetual and will carry an initial interest rate of 13.16% pa
payable quarterly. The interest rate will be reset on 30 September each year
at 4.5% above the then one year swap rate. Speirs Group has
a put option to call on Allied Farmers to redeem the Bonds in five years time
at face value.
The proposed Transaction steps are for Speirs Group to separate its finance
business into a new entity, Speirs Finance Limited ( Speirs Finance). This
entity is then proposed to be sold to Allied Farmers.
The Transaction is conditional upon obtaining all the required approvals from
Speirs Group shareholders and debt obligation holders, as well as
confirmation that the existing Speirs Group securitisation programme will
retain its A-1+ rating from Standard & Poor s following the sale of Speirs
Finance to Allied Farmers.
There is strong compatibility between the two finance businesses. The
proposal will give the combined finance businesses increased scale and access
to an existing funding programme in a consolidating market.
Speirs Group expects to remain listed on the New Zealand Alternative Exchange
( NZAX) and will primarily have investments in Speirs Nutritionals Limited,
Speirs Foods and its shares in Allied Farmers and the bonds in Allied
Nationwide. Speirs Group will have no significant third party interest
bearing debt balances following completion of the Transaction.
Nelson Speirs, Executive Chairman, of Speirs Group will be invited to join
the board of directors of Allied Nationwide.
Level 3, FMG House, 55 The Square, PO Box 400, Palmerston North, New Zealand,
Freephone 0800 65 45 45, Fax 06 350 6020
Website www.speirs.co.nz, Email investments@speirs.co.nz
Nelson Speirs, Executive Chairman of Speirs Group, said:
We are pleased to have reached agreement with Allied Farmers on the sale of
Speirs Finance. In the current climate, the directors of Speirs Group
recognise that is was desirable for Speirs Finance to become part of a larger
business to provide a sustainable future and growth opportunities for the
business and its employees in the New Zealand finance sector. I am
delighted to be invited to join the board of Allied Nationwide.
David Bale, Chief Executive of Allied Farmers, said:
By amalgamating Speirs Finance with our subsidiary, Allied Nationwide
Finance, we will have diversity across the finance business with an asset
book of around $400 million. The acquisition fits well with our strategy of
becoming a leading provider of non bank finance to the rural and other
sectors in New Zealand.
Contacts:
Speirs Group Limited
Nelson Speirs, Executive Chairman Tel: (06) 350 6003
23 July 2008
SPEIRS GROUP LIMITED
On 23 July 2008, Speirs Group announced that it has entered into a
conditional agreement to sell its finance business to Allied Farmers for $5.6
million.
Introduction
The board of Speirs Group (the Board) has been considering the sale of its
finance business, Speirs Finance, to another finance business to give it more
scale in a consolidating market.
Speirs Finance has continued to perform well despite the challenges presented
by the global credit market and the flow-on impact of this on the New Zealand
market and for finance companies generally. Speirs Finance has funding lines
from supportive debenture, note and perpetual bond holders and a
securitisation programme with the Bank of New Zealand ( BNZ).
However, it has become increasingly apparent to the Board in recent months
given the current environment and upcoming Government regulation for finance
companies, that the future of Speirs Finance is enhanced by being part of a
larger finance business with a broader portfolio of activities and enhanced
funding opportunities. The Board has decided this course of action will
provide a better outcome for the company as a whole than an alternative of
seeking to acquire other finance companies to build scale to compete
effectively in the changing borrowing and lending markets.
The Board has explored a number of sale options for Speirs Finance and is
pleased to announce that this process has culminated in this announcement and
the proposed sale of Speirs Finance to Allied Farmers.
Speirs Finance is a provider of asset financing to the plant, machinery and
light & heavy business vehicle sector in New Zealand. There is a good fit
between the activities of Speirs Finance and the wider rural, commercial and
other financing activities of Allied Nationwide (as discussed below).
Information on Allied Farmers
Allied Farmers is listed on the New Zealand Stock Exchange ( NZX) and has
widespread activities throughout New Zealand. It is a diversified regional
rural servicing and finance group in New
Zealand. Its activities include offering its clients:
rural merchandising and bulk farm supplies through its stores in the North
Island;
advice and trading in livestock, particularly dairy cows;
crop advice;
specialised rural real estate services; and
financial services through Allied Nationwide.
Allied Nationwide has a strategy to be a leading provider of non bank finance
to the rural, commercial and other sectors in New Zealand. In 2007, Allied
Farmers acquired Nationwide
Finance and combined this with Prime Finance Limited. The proposal to
acquire Speirs Finance will provide Allied Farmers with a finance company
with a combined asset book of around $400 million.
As at 31 December 2007, Allied Nationwide had cash balances of $41 million
and a loan book that was diversified across rural, property, capital
equipment, business and consumer finance.
Allied Farmers has a market capitalisation of around $24 million. For the
year ended 30 June 2007, Allied Farmers recorded revenue of $107.8 million
(2006: $85.2 million) and profit before
tax and interest from continuing activities of $5.7 million (2006: $3.5
million). It had shareholders equity of $24.3 million as at 30 June 2007.
Consideration
The proposed sale of the finance business of Speirs Group (being Speirs
Finance) is for consideration of $5.6 million. This will comprise the
following:
cash at completion of $3.1 million and new shares in Allied Farmers to the
value of $2.5 million (being 1,851,852 ordinary shares in Allied Farmers).
Speirs Group will become a major shareholder in Allied Farmers and will hold
approximately 8.85% of the shares of Allied Farmers; and
immediately following completion, Speirs Group will apply $2.0 million of its
cash consideration to subscribe for $2.0 million of perpetual bonds in Allied
Nationwide Finance Limited ( Allied
Nationwide). The Bonds will be perpetual and will carry an interest rate of
13.16% pa payable quarterly. The interest rate will be reset on 30 September
each year at 4.5% above the then one year swap rate. Speirs Group will have a
put option to call on Allied Farmers to redeem the Bonds in five years time
for cash at their face value, or to transfer the Palmerston North investment
property back to Speirs Group, at the option of Speirs Group.
Proposed structure of the Transaction
The proposed Transaction steps are for Speirs Group to separate its finance
business into a new entity, Speirs Finance Limited. This entity is then
proposed to be sold to Allied Farmers.
Under the proposed Transaction, Speirs Group will separate and transfer to
Allied Farmers all of the Speirs Finance assets, liabilities (including all
secured debenture stock, commercial paper, subordinated notes and perpetual
bonds), its business and the investment property based in Palmerston North.
Allied Farmers will then amalgamate Speirs Finance with its finance
subsidiary, Allied Nationwide.
Allied Nationwide will assume all the contractual obligations of Speirs
Finance, including employment contracts, leases and its agency network
agreements.
Following completion of the Transaction, Speirs Group expects to remain
listed on the New Zealand Alternative Exchange ( NZAX) and will primarily
have investments in Speirs Nutritionals Limited,
Speirs Foods and its shares in Allied Farmers and the bonds in Allied
Nationwide.
The Speirs Group balance sheet will have total assets with a book value of
some $17 million and no significant external debt balances. Speirs Group
will have sold all its interest bearing liabilities in respect of Speirs
Finance.
Speirs Group will continue to manage Speirs Foods. It will also receive
interest payments generated by its subscription for perpetual bonds in Allied
Nationwide and will receive its share of any dividend payments made by Allied
Farmers in respect of the Speirs Group shareholding in Allied Farmers.
Principal terms and conditions of the Transaction
The Transaction is conditional, amongst other things, upon obtaining all the
required approvals
from:
Speirs Group shareholders;
Speirs Group debt obligation holders; and
Confirmation from Standard & Poor s that the existing Speirs Group
securitisation programme will retain its A-1+ rating following the sale of
Speirs Finance to Allied Farmers and the amalgamation of Speirs Finance with
Allied Nationwide Finance.
Speirs Groups executive chairman, Nelson Speirs, will be invited to join the
board of directors of Allied Nationwide.
Indicative timetable It is proposed that the Speirs Group shareholder and
debt obligation holders meetings will be held
in August 2008 to approve the Transaction, with completion of the Transaction
as soon as possible thereafter.
Formal notices of meetings of Speirs Group shareholders and debt obligation
holders to approve the Transaction will be posted shortly.
Summary
The Directors of Speirs Group consider that this proposal is in the best
interests of the Companys shareholders, its debt obligation holders and its
other financial stakeholders.
Accordingly, the Directors of Speirs Group will recommend that the Speirs
Group stakeholders vote in favour of the Transaction, as they intend to do in
respect of their respective shareholdings in Speirs Group.
END.
